On May 30, 2018, Iowa Governor Kim Reynolds signed Senate File 2417 (SF 2417), an extensive state tax reform bill to improve the tax structure in Iowa. This law modernizes and expands the types of businesses required to collect Iowa sales tax and local option sales tax. Specifically, marketplace facilitators and remote sellers that exceed a certain amount of revenue must charge Iowa sales tax and applicable local option sales tax the same as retailers with a physical presence in Iowa.
The following types of businesses must get an Iowa sales and use tax permit and file sales and use tax returns:
- Retailers with a physical presence in Iowa
- Remote sellers that have $100,000 in gross revenue from Iowa sales
- Marketplace facilitators that make or facilitate $100,000 or more in Iowa sales
A business does not need to get an Iowa sales and use tax permit or file Iowa sales and use tax returns if the business does not make any taxable retail sales.
Example: Retailer A only makes retail sales of unprepared food that is exempt from Iowa sales tax. Retailer A does not sell any other products or services that are subject to Iowa sales and use tax. Retailer A is not required to obtain an Iowa sales and use tax permit or file Iowa sales and use tax returns.
If these businesses begin making taxable retail sales in Iowa, they must collect sales tax and applicable local option sales tax, obtain an Iowa sales and use tax permit, and begin filing Iowa sales and use tax returns.
Retailers (including remote sellers) and marketplace facilitators required to have an Iowa sales and use tax permit must collect state sales tax and applicable local option sales tax on all taxable Iowa retail sales.
The sales and use tax collection provisions of SF 2417 require many sellers who previously held a retailer’s use tax permit to now report their sales as sales tax on a sales and use tax permit.
Remote sellers and marketplace facilitators whose Iowa sales volume is below the amount required to collect sales tax may use a sales and use tax permit to collect and remit use tax on sales subject to use tax.
Iowa is one of over 20 states that belong to the Streamlined Sales and Use Tax Agreement. Rather than registering individually in Iowa, retailers can register for a sales tax permit in all participating states by completing just one short and simple online application through the Streamlined Sales Tax Registration System.
If you only need a sales or use tax permit in Iowa, you may register for one through the Department’s online portal, GovConnectIowa.